Time Running Out on Blackstone-Backed Bid for Sears Canada

A management group led by Brandon Stranzl and backed by Blackstone Group LP, has until Oct. 13 to convince a special committee of Sears Canada’s board of directors to accept his revised bid for the chain.

(Bloomberg)—Time is running out for Sears Canada Inc.’s executive chairman to pull off a bid for the company’s assets and avert a liquidation that would eliminate as many as 13,000 jobs.

A management group led by Brandon Stranzl and backed by Blackstone Group LP, has until Oct. 13 to convince a special committee of Sears Canada’s board of directors to accept his revised bid for the chain. That day the Toronto-based company faces a court hearing to liquidate its remaining stores, a move its creditors have been urging as the best way to settle its debts, including C$450 million ($359 million) of debtor-in-possession financing from a group led by Wells Fargo & Co.

Talks between Stranzl and the committee are continuing, with a decision expected any time between now and early next week, according to people familiar with the matter, who asked not to be identified because the discussions are private. The unconditional bid is backed by private equity, including Blackstone, which has committed to providing a loan backed by the inventory, the people said.

Sears Canada, which filed for creditor protection in June with C$1.1 billion of liabilities, is a victim of the department-store malaise that’s swept North America as consumers gravitate online and out of malls. While the retailer has dabbled in pop-up stores and e-commerce, its distribution centers aren’t as automated as Amazon.com Inc. or even Canadian peer Hudson’s Bay. Co, which last year opened its own robotic facility to get online orders out faster.

“They made a good effort but it was much too little, too late,” Jean Rickli, a Montreal-based senior adviser at retail consultants J.C. Williams Group.

Sears Canada had 225 stores and 17,000 employees when it filed for creditor protection. It continues to bleed cash, and its creditors and court-appointed monitor are urging it to liquidate before the holiday season in order maximize recovery. On Wednesday it won court approval to close 11 stores.

Breached Milestones

The special committee received a revised version of Stranzl’s bid, the only one for the assets, on Tuesday night and is evaluating it, according to the people.

FTI Consulting Inc., the company’s court monitor in restructuring, said in a Oct. 2 report that a liquidation would likely present better recovery than Stranzl’s bid for creditors which include current and former employees, suppliers, and landlords. Its restructuring financing group, led by San Francisco-based Wells Fargo, has echoed those sentiments.

Sears Holdings Corp. has been struggling south of the boarder since its chief executive officer Edward Lampert combined it with another troubled retailer, Kmart Holding Corp. in 2005. To counter losses approaching $11 billion in the past six years, the company’s been selling and spinning off assets, including most of its stake in Sears Canada.

Target Corp., which filed for creditor protection in Canada and then withdrew from the country in 2015, has left a hole in many of the country’s malls, making it tougher for Sears Canada to find buyers for its real estate and leases.

Sears Canada must also address its monthly pension obligations to its 18,000 retirees and beneficiaries. A motion was filed in August for a windup of the plan, which would require the company to pay the full C$266.8 million deficit, according to the filing. That motion has been postponed until at least Nov. 30.

--With assistance from Lauren Coleman-Lochner.To contact the reporters on this story: Allison McNeely in Toronto at amcneely@bloomberg.net ;Sandrine Rastello in Montreal at srastello@bloomberg.net To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net ;Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Shannon D. Harrington